Wall St. falls as inflation and Iran tensions weigh.

S&P 500 and Nasdaq fell from their record highs Tuesday. Technology stocks led the declines after a hotter than expected?inflation rate report, as well as stalled attempts to resolve the Middle East conflict, weighed on sentiment.

U.S. consumer prices rose at a rapid pace in April for the second consecutive month, pushing inflation to its highest rate in almost three years. This reinforced expectations that Federal Reserve would keep interest rates on hold for longer. In recent weeks, a positive earnings season helped to boost the market's sentiment. However, investors were still on edge because negotiations between Washington DC and Tehran showed little progress.

Donald Trump claimed that a ceasefire between the United States and Iran was "on life support". This came after Tehran rejected an American proposal to end this conflict. The rejection kept crude prices high, fueling inflation fears. The market now looks at the Fed, and says that the next move if any is a hike rather than a reduction. Scott Welch is the chief investment officer at Certuity.

CME Group's FedWatch Tool shows that traders expected two rate reductions before the war. However, they now expect the Federal Reserve interest rates to remain unchanged until the end of this year.

At 12:30 p.m. ET, the Dow Jones Industrial Average fell 177.42 points or?0.36% to 49,527.05, while the S&P 500 lost 65.48 points or 0.88% to 7,347.36. At 12:30 p.m. ET, the Dow Jones Industrial Average dropped 177.42?points, or?0.36%?to 49,527.05, while the S&P 500 fell 65.48?points, or?0.88%?to 7,347.36, and the Nasdaq Composite dropped 448.73?points, or?1.71%?to 25,825.79.

The markets were heavily weighed down by technology stocks on Tuesday. Chip stocks, which had been soaring in recent days, fell sharply. The Philadelphia SE Semiconductor Index fell almost 6%, but is still up 50% this quarter. The sector also suffered from the news that South Korea’s Presidential Policy Advisor Kim Yong Beom floated a "citizens' dividend" in a post on social media. He argued that excess earnings during the AI era should be distributed to all citizens.

Welch added, "I think investors are beginning to take profits after the recent rally in semiconductor and mega-cap?tech stock prices."

Intel fell 9.7%, after climbing more than 17% in the two previous sessions. Qualcomm also dropped 13.7% following a record-high on Monday.

Markets are watching Trump's upcoming visit to China which starts on Wednesday. Expectations for progress in Iran and on the trade front remain low. Zebra Technologies, a barcode scanner manufacturer, jumped 16.8% following an increase in its sales forecast. The company is betting on a robust demand for their products, which automate manufacturing workflows. Hims & Hers Health fell 15.2% when the telehealth company missed Wall Street's estimates for its first-quarter revenue. On the NYSE and Nasdaq, declining issues outnumbered advancing ones by a ratio of 2.84 to 1.

The S&P 500 recorded 11 new 52-week lows and 28 new highs, while the Nasdaq Composite registered 43 new highs with 126 new lowers.

(source: Reuters)